In every divorce, couples must divide marital property and debt before the judge will grant the request for a divorce. Couples have two choices: work together to determine what property each spouse will take away from the relationship, or ask the court to decide for you. If you live in a community property state, the court presumes that any assets (or debts) accrued during the marriage belong equally (50/50) to both spouses. If you have property that belongs to you, whether you brought it with you to the marriage, or you acquired it alone during your relationship, you’ll need to ask the court to award the separate property to you. In equitable distribution states, the court will divide marital property fairly between the spouses, which doesn’t always mean a 50/50 split. The court will categorize the property as marital or separate before the judge awards any portion to either spouse. If you have separate property, you’ll need to prove your ownership with receipts, witnesses, or any other evidence.
Work Together to Reach a Property Agreement
There’s no doubt that a judge won’t understand your family’s circumstances as well as you do. If you’d like to keep control of how you split your assets and debts in your divorce, it’s best to work with your spouse, rather than letting a court decide.
Create a List of Assets
One of the easiest ways to start the property division process is for each spouse to create a list of assets and identify which spouse should receive it in the divorce. When you’re both finished with your list, you can come together to compare. If you have a dispute, work together to resolve it and determine who should get the property. It’s important to be transparent through the property division process. Both spouses must identify all assets that they acquired throughout the marriage, which includes bank accounts, insurance policies, vehicles, retirement accounts, pensions, real estate, recreational vehicles and equipment, and anything else that holds value. If you agree to a property settlement and later find out that your spouse didn’t disclose an asset, you can ask the judge to reopen your case to revaluate the property division. In addition to potentially losing assets later, the guilty spouse may also face fines or penalties from the court if the judge believes your ex intentionally failed to disclose or hid information the asset. Honesty is always the best policy when it comes to disclosure. Generally speaking, courts will accept the fair market value (FMV) of each item, which is what you can get for the item if you sell it on the open market today, not what you paid for it.
Value Your Property
Another important step is to determine what the property is worth. Generally speaking, courts will accept the fair market value (FMV) of each item, which is what you can get for the item if you sell it on the open market today, not what you paid for it. Try to agree on a value for each asset worth more than a specific amount—say, $100 or $500. There are some useful websites that can help you value certain property, such as Zillow.com or Redfin.com for real property, and Kelly Blue Book for vehicles. For more difficult or complex valuations, like of a business or antique collectibles, you may need to hire an appraiser. If you can’t agree on a value for a specific item, you may each have to hire independent appraisers, and ask a judge to pick from one of the two valuations.
Determine If the Property Is Marital or Separate
Whether you’re in a community property or equitable distribution state, if you own separate property, it will remain in your possession. That said, you must first categorize and agree that the assets were separate before you can move forward. Each spouse should identify the owner of each asset. If there is a disagreement about whether an asset is marital or separate, the person claiming the item will have to prove to a judge that it’s owned separately. You can do this by showing the date of purchase, where the funds came from to purchase the item, and how the item was kept separate during the marriage.
Don’t Forget About Your Debt
Marital debt is not excluded from property division in a divorce. If you acquired joint debt during your marriage, like a mortgage, car payment, or tax debt, you will probably have to split that between the two of you during your divorce. If you owned a credit card in only your name, and you never used it for marital purposes, like groceries, you may be solely responsible for the amount owing. Remember, while the court can assign the debt to either (or both) spouse, it can’t change the contract you have with your creditors. For example, if the judge requires your spouse to pay off a joint credit card, but your ex fails to pay the monthly payment to the creditor, the credit card company can (and will) still come after you for payment. Unless you want your credit score to be in jeopardy, you’ll need to pay it, and ask the court for reimbursement from your spouse later.
Draft a Settlement Agreement
If you and your spouse can agree on all of the terms of your property and debt division, you can create a property settlement agreement to present to the judge. Your agreement should list each asset and debt, the owner, and the value. If you want to be sure that you’re not making a bad deal, you should ask an experienced attorney to review the agreement before you sign it. In most cases, the judge will honour your agreement. However, if a party without a lawyer agrees to a property settlement that awards more than half of the property to the other spouse, the judge may want to investigate before approving it. No court wants to see a spouse walk away with an unfair distribution of property.
What If We Can’t Agree on How to Handle a Specific Asset?
If you and your spouse can’t reach an agreement on property and debt division, you can eliminate the issue by selling the asset and dividing the profits. For example, in most divorce cases, the couple will sell the marital home, subtract the mortgage debt, and split the proceeds. However, if you can’t decide what percentage of the profits each spouse should take, you may have to ask a judge to decide for you.
Dividing Property and Debt During Divorce
Very generally, here are the rules for determining what community property is and what isn’t:
• Community property includes all earnings during marriage and everything acquired with those earnings. All debts incurred during marriage, unless the creditor was specifically looking to the separate property of one spouse for payment, are community property debts.
• Separate property of one spouse includes gifts and inheritances given just to that spouse, personal injury awards received by that spouse, and the proceeds of a pension that vested (that is, the pensioner became legally entitled to receive it) before marriage. Property purchased with the separate funds of a spouse remains that spouse’s separate property. A business owned by one spouse before the marriage remains his or her separate property during the marriage, although a portion of it may be considered community property if the business increased in value during the marriage or both spouses worked at it. If separate property is commingled with community property during the marriage, it may become community property, either in part or entirely, depending on the circumstances.
• Property purchased with a combination of separate and community funds is part community and part separate property, so long as a spouse is able to show that some separate funds were used. Separate property mixed together with community property generally becomes community property.
Who gets to stay in the house?
If children are involved, the parent who spends the most time with the kids, or who provides their primary care, usually remains in the marital home with them. If you don’t have children and the house is the separate property of just one spouse, that spouse has the legal right to ask the other to leave. If, however, you don’t have children and you own the house together, this question gets tricky. Neither of you has a legal right to kick the other out. You can request that the other person leave, but you can’t require it. If you and your spouse don’t come to a decision, the court will decide for you during divorce proceedings or earlier, if you ask for a temporary order on the issue. If your spouse changes the locks or somehow prevents you from entering the home, you can call the police. The police will probably direct your spouse to open the door and let you back in. When you both own the home, the only time you can get your spouse to leave is if your spouse has committed domestic violence and a judge grants a restraining order. Whatever you do, do not claim domestic violence has occurred just to get your spouse removed from the home. (Some people have resorted to this extreme tactic.) Once a judge realizes this has occurred, the party claiming violence may be asked to vacate the home and the judge may be biased against him or her during future negotiations. If you believe you are a victim of domestic violence, but are not sure, go to the Yellow Pages and call your local domestic violence hotline. It is common for a divorcing couples to decide about dividing their property and debts themselves (with or without the help of a neutral third party like a mediator), rather than leaving it to the judge. However, if a couple cannot agree, they can submit their property dispute to the court, which will use state law rules to divide the property. Courts divide property under one of two basic schemes: community property or equitable distribution. Debts are divided according to the same principles.
• Community property. In Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin, and Puerto Rico, all property of a married person is classified as either community property (owned equally by both spouses) or the separate property of one spouse. At divorce, community property is generally divided equally between the spouses, while each spouse keeps his or her separate property.
• Equitable distribution. In all other states, assets and earnings accumulated during marriage are divided equitably (fairly), but not necessarily equally. In some of those states, the judge may order one party to use separate property to make the settlement fair to both spouses.
Division of property does not necessarily mean a physical division. Rather, the court may award each spouse a percentage of the total value of the property. Each spouse will get personal property, assets, and debts whose worth adds up to his or her percentage. (It is illegal for either spouse to hide assets in order to shield them from property division.) In divorce, property division can be almost as angst-provoking as deciding who gets custody of the children. And like custody issues, couples can either work it out amongst themselves and their lawyers, or take their chances with the judge. Property that is considered a product of the marriage (and, therefore, fair game to be split among divorcing couples) includes wages earned during the marriage, real property (homes and land) bought during the marriage, personal items such as furniture and cars, and even pensions accrued during the marriage. Divorce property division laws vary from state to state. It is always best to consult with an attorney. In general, however, states use one of two methods: community property and equitable distribution.
Community Property
There are nine states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin) that consider property acquired during a marriage to be community property. In these states, marital property is split 50-50 between the divorcing couples. In community property states, “lawmakers believe property should be divided equally because they view marriage as a joint undertaking in which both spouses are presumed to contribute equally to the acquisition and preservation of property,” according to the American Bar Association, a professional organization for attorneys. Alaska actually uses a hybrid of community property. The state allows married couples to “opt in” to having a community property partnership by either a legal agreement or trust. Generally, in both community property and equitable distribution states, property acquired before the marriage and kept separately from other property obtained during the marriage is not shared in the divorce but retained by the spouse to whom it belongs.
Equitable Distribution
Nearly all the other states have property division laws that use equitable distribution as a method to divvy up the property. Equitable distribution attempts to achieve fairness, which may or may not result in a 50-50 split. “The division of property could be 50-50, 60-40, 70-30 or even all for one spouse and nothing for the other,” the ABA writes in a book about divorce.
In coming up with a solution judges will deem fair, they consider many factors, including:
• The length of the marriage
• The work history and job prospects of both spouses
• The physical and mental health of both spouses
• Expenses for the children
• Who earned the property (for example, if a business was run by one of the spouses)
In some states, such as Florida, bad behavior during the marriage can result in a smaller slice of the property pie. This is called economic fault, and it includes situations such as gambling, money spent on an extramarital affair or giving money to relatives against the wishes of the other spouse. Sometimes there is a time limit during which fault can be assigned – such as only considering bad decisions made while the marriage was breaking down. Other states can find fault at any point during the marriage.
The Nuts and Bolts of Divorce Property Division
Judges will usually approve a property division agreement if the couple figures who gets what on their own. If divorcing spouses cannot agree, they should consult with their attorney as to whether it makes any financial sense – based on the value of the property in question – to pay for an expensive trial. This is called a cost-benefit analysis. To figure out what to divide, divorcing spouses need to take an inventory of their property. It is very important to list all property and not try to hide any assets. Besides the usual places – bank accounts, real estate, jewelry – marital property can be found in pensions, IRAs, stocks and bonds, certificates of deposit, money market account and safety deposit boxes. If spouses cannot agree as to the value of various property, they should hire a professional appraiser to assist them in determining value. Once the spouses are settled on the property division, the attorneys can write up the property settlement agreement and present it to the court. If, after the agreement is entered, one of the spouses refuses to abide by it, one of several remedies – depending on state law – can help. Non-receiving spouses can file a contempt proceeding where they ask a judge to hold the other spouse in “contempt of court.” The penalties may include a jail term, usually no more than 30 days, a fine or both. In other states, an injunction is a step that comes before a finding of contempt. In an injunction, the court orders someone to perform a certain act, in this case, dividing the property instructed in the property settlement agreement.
Dividing Debts
Just like property, debts accrued during the marriage will also be split between divorcing spouses. Again, state laws will dictate how this is done. In general, though, those who will keep a financed piece of property, such as a car or house, also get the debt associated with that property.
Other variables to ponder:
• The spouse who receives more of the property is likely to get more of the debt
• Debt can be paid down by either using a tax refund or selling some property
• If one spouse makes more money, that spouse may get more of the debt
• Whether someone is paying alimony could influence the portion of the debt he or she receives
• Will an increase in rent or insurance premiums make it impossible to take on certain debts
Divorce Property Lawyer
When you need legal help from a Divorce Property Lawyer, please call Ascent Law LLC for your free consultation (801) 676-5506. We want to help you.
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506
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